Devil’s Elbow launches equity crowdfund

Devils elbow

A year after opening, Dubbo brewery Devil’s Elbow is aiming to raise funds to increase capacity and grow its distribution footprint with an equity crowdfunding campaign.

The regional NSW brewery opened its expression of interest phase after launching in a purpose-built facility last year, a month after Hawkers Beer announced its campaign, also on the Birchal platform.

General manager Brendon O’Sullivan, who along with Paul and Melissa Knaggs, and Peter Drayton and several other shareholders founded the brewery, said that they were looking to grow after laying the foundations of the business in 2019.

“Last year was building the brewery, opening the brewery, settling in and getting used to how it all runs, as well as getting our brand out there,” he told Brews News.

“2020 is our growth year. We have invested heavily into a reasonably-sized brewhouse, we definitely haven’t started out small. We jumped right in there and made it what it needed to be for our plans.

“So this year it’s production and distribution, getting the brand known regionally, starting with a local footprint of the central west, and then regional NSW from top to the bottom. We’re not too worried about Metro or the coast just yet.

“This year if we can get into that space, happy days.”

Crowdfunding aims

According to its Birchal crowdfunding page, Devil’s Elbow said it would be looking at the distribution of its beer as a “growing focus”.

“Rather than make the mistake of starting small, and having to suffer moving pains later, we built a building that can expand internally as needed.” it said.

The founders said that currently it brews 200,000 litres, but investment in solar power, canning line and storage tanks could see this rise to 1,000,000 litres.

“Our distribution partners are happy to [grow the distribution network], providing we have the volume, so it is quite an investment we need to produce a lot of product on a regular basis,” explained O’Sullivan.

“In addition to that we’ll have our own marketing and sales force we need built up, vehicles for distribution…

“We’ve got a premium product, it’s really good, but getting it out there has been hard, though that wasn’t our main focus last year,” he said.

Equity crowdfunding vs traditional investment

O’Sullivan explained that the Devil’s Elbow team looked to crowdfunding after seeing successful investor-backed breweries and reaching the ceiling of their own abilities to invest. The shareholders backed the first phase of the brewery with $3 million of their own funds.

“In the craft beer industry I’ve discovered that just about every brewery out there that is doing well has backers. Even smaller breweries still have investment from external parties because they just couldn’t grow without it, and we’re in the same boat,” he said.

“I took part in Blacks Hops’ [campaign] last year, I went through the process and understood how it all went. I thought, this is pretty straightforward from an investor’s perspective, I think this could fly [with Devil’s Elbow].

“We did our research, and I spoke to my partners. We decided it was something we can definitely do and Birchal has been nothing but fantastic when it comes to the support and assistance they’ve been providing.

“[We’ve found there’s] a larger, external community of craft beer lovers [who will back us].”

The EOI phase closes tomorrow (19th February), and O’Sullivan estimates there will be around 350 potential investors based on current numbers, although he did not disclose the investment Devil’s Elbow is targeting.

“Those that have expressed interest have surprisingly been larger investment dollar numbers than smaller,” he said.

“We have some very serious craft beer lovers out there. A guy the other day said I like to feel like I’m a part of a company. He said I don’t use much coal or anything like that, but beer I can get behind.

“We’ve kept our campaign probably a little bit close to the chest from a media perspective, we didn’t push messaging out because we thought we’d only get our local community.

“But it’s turned out to be national, people from everywhere from Queensland down to Victoria and everywhere in between – maybe they’ve all been to the zoo!”

Expressions of interest

There are risks around any investment, and on Devil’s Elbow’s Expression of Interest page, the founders acknowledged that there are “factors outside of our control that could impact on our business”.

“These include the current bushfire situation, continuing drought and financial uncertainty in the markets that could result in business targets not being met,” it said.

However O’Sullivan explained that there were not many investors he had encountered that were on the fence about investing.

“I haven’t had to do the hard sell, mostly they fire the questions at me. I’m utterly transparent and honest, if I’m not then they’re not going to get the full picture and it could turn out for the worse.

“But very few are sitting on the fence, they’re super keen and what they all want to know is what’s going to happen in the industry in the next five years?”

He said he uses the example of the US brewing and hospitality industry as a gauge.

“I relay my story of what I’ve seen when I went to the US. Their distribution model is quite different, and we’re a million miles away from what’s happening in the US in that respect. Volumes of population aside, they have local communal craft breweries, as a pub replacement.

“They’re there to taste a premium product in a casual dining setting. That’s how we do it [at Devil’s Elbow]. You come in, chill out, it’s all very relaxed and casual.

“That’s what consumers are looking for, they’re after a localised experience and they bring their family and friends back. It’s a community-based venue.”

Following the EOI phase, offers will be given privately to investors who have already expressed their interest, and if a maximum target has not been achieved, the campaign will open to the public.

Expressions of Interest for Devil’s Elbow Brewery’s equity crowdfunding campaign will close tomorrow (19th February).

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